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Current market conditions present two unfortunate realities for prospective home sellers: prices are declining. Market times are not.

As a result, the general perception in the marketplace is that Buyers now have the upper hand over Sellers. To the extent that there are so many more Sellers than Buyers in the active market this may be so. This makes many Sellers uneasy and quite understandably so. Once they get past the lowest low-ball offers, many Sellers are quick to accept the first "decent" price offered and then hope for the best.

Reality is showing us however that merely accepting an offer does not assure an actual closing. There are still many perils and pitfalls that are keeping a high number of contracts from closing.

Sellers MUST plan carefully to better the likelihood that the contract will close. This post and others that will follow in this series will offers specific suggestions to help sellers write better better contracts.

Two simple objectives here:

Get the Contract Closed

Save Whats Left of the Equity.

Once a Seller accepts an offer, the MLS listing is supposed to be changed from “active” to “pending.” The property is as good as off-the-market for as long as it is pending; Few Buyers invest time or effort looking at properties that is already promised to someone else. Even fewer real estate agents want to show such homes to prospective buyers.

If you are trying to sell a home, the only thing worse than long market times is the risk of losing market time while the home under contract and “pending” a Buyer's mortgage approval, only to find out that the Buyer cannot secure the financing and that the contract will not close. This is especially important right now, during the all important spring and summer markets.

To be clear, we are not talking about closings delays caused by a lender processing the loan application (though these days, that happens plenty too). I mean loans that are denied. Ash canned. Rejected. We are talking about the time lost to a Buyer that will never close. Not on time, not late, never.

Sadly, I have opened (and closed) a number of files over the last year in which a Buyer flat out could not close the contract. For example, in recent months, I have seen buyers sign contracts where they
  • had no job history for any of the the previous years.
  • no proof of the source of substantial gifts
  • were relying on a graduate student job prospectively being extended into full time employment
  • were relying on an insurance settlement check for a claim that had not yet been resolved
  • applied for a mortgage on a contingency with terms 1 full point lower than the prevailing market rate.
  • contingent on the sale of a home that had not sold in 6 months on an active MLS listing.
Not one of them closed.... and took weeks and months of waiting before disappointed Sellers were able to reactivate listings.

There is a school of thought (often advanced by the listing agent) that says that any offer - even a shaky offer - is better than no offer at all. Take it, see what happens. Hope for the best. I beg to differ. I do not see the point tying a property up, taking it off the market, and working with a Buyer unless there is a good likelihood of getting the deal done.

How is it that this still happening? Hard to say, but I am seeing a significant number of offers being made by buyers who are completely unprepared for the mortgage application process and who have very little understanding of their ability to borrow or their financial means and needs.

These are the types of disappointments are best avoided by giving fuller and more careful consideration to a given Buyers' financial qualifications before accepting an offer. Sellers, and their real estate representative should be asking more - and better - questions.

  • Has the buyer presented any evidence of ability to secure financing?
  • Is the buyer working with a known / reputable mortgage broker or banker?
  • More importantly, is the buyer working with a known & well regarded loan officer?
  • Has the Buyer obtained any sort of lender pre-approval or pre-qualification?
  • Is the approval letter sourced from a broker, or an actual lender/underwriter?
  • Is that "approval" based on any sort of actual credit check or other “real” review?
  • Is the Buyer employed (in a stable or long-standing job position?)
  • Is the buyer’s offer contingent on the sale of some other property? Is that property actually under contract or is it just now being offered for sale?
  • Can the buyer prove that he actually has funds available for the down payment?
Better the chances of arriving at the finish line by asking the right questions at the start -

Let me know if you have any questions about evaluating the sufficiency of a Buyer's proposed financing - or any other aspect of reviewing purchase offers. I would be glad to be of service.


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